Professional equity crowd investing is set to help new leaders out of Slovakia become globally successful
Companies face a wide range of opportunities as well as challenges in today’s fast changing globally connected business environment. Any company must adapt to dynamic changes, grow, innovate, strive for the best customer service and relations possible, to avoid being left behind by tough - global - competition. Usually this requires additional financing or growth capital.
Nowadays, globally successful companies - once startups - of the likes of Eset, Pixel Federation, Sli.do, Sygic or Visicom built their success on skilled people with technical and IT backgrounds. They all have originally emerged out of Slovakia, which is becoming a strong innovation hub in CEE. Newer generations of Slovak companies targeting international or global markets follow, among others Ecocapsule, Exponea, MultiplexDX, SEAK, Innovatrics, Sensoneo or Voltia. Bringing SMEs to the next level of success or building innovative companies from scratch increasingly requires external capital, which shall be deployed to accelerate a company’s innovation powerand enable it to keep a head-start from competition. Bank financing faces increasingly tighter regulation and is not necessarily available for certain financing needs of businesses, e.g. geographical, product or team expansion, acquisitions or changes in shareholder structure. Equity investments on the other hand strengthen the balance sheet of a company and enable initial absorption of losses incurred from expansion and fast growth. They also improve their risk profile and enable access to early or additional bank financing. And thus, should be considered as complementary to traditional sources like bank financing.
Equity usually comes from private investors like venture capital or other private equity investment funds. However some healthy businesses seeking expansion are not suitable or open to receive financing by venture capital or private equity funds. Companies – start-ups or SMEs – thus increasingly turn to the crowd. Professional equity crowd investing then fills the gap or become a complementary source to other financing solutions. It tends to follow first financing rounds by founders, family members or friends and is followed by or comes alongside investments from business angels and first institutional investors (e.g. venture capital funds).
Quite a mature market in the US, UK or Western Europe, crowd investing is a newcomer to CEE. However, since 2016 dozens of companies in Slovakia and Czechia raised their funding this way already. They all have the profile to become international or regional leaders.
For most crowd investors, financial returns are only a part of their motivation to engage. They also use their investments as a gateway to companies’ innovation power, as a source of inspiration for their own businesses or a way of supporting the entrepreneurial ecosystem while still maintaining significant investment return potential. With crowd investing enabling active support and engagement of private investors, a target company gains not only the required growth capital, but also the leverage of their experience, wisdom and network. Moreover, investors naturally take up a role of enthusiastic ambassadors and bring along new customers, suppliers, team members or advisors; all beneficial factors for further growth and success.
One of the best recent examples in Slovakia is the globally recognised self-sustainable micro-home Ecocapsule. In winter 2016, cofounder Tomas Zacek met 20 potential investors at one of the investor events at Tatra banka Private Banking organised by the professional crowd-investment platform Crowdberry. He presented his vision and the investment opportunity to become a part of the entrepreneurial journey of his company. Already back then, Ecocapsule and its iconic design were resonating globally, receiving hundreds of order inquiries. However, Tomas only had four colleagues and almost no budget to kickstart the production. The company was not yet eligible for bank financing and had been broadly misunderstood by traditional investment funds.
In what has later become one of the largest crowd investing campaigns in CEE, Ecocapsule accepted 11 private investors from three continents as new co-owners. 750,000 euros enabled the company to develop and produce first Ecocapsules. Moreover, certain investors supported the company on its growth path by helping with sourcing components, product development, distribution in Southeast Asia or identifying suitable factory locations and potential clients.
After a year in January 2018, the company presented the results of its first investment round in a world premiere to the Slovak media: a fully functional Ecocapsule ready for its first customers, flown by a helicopter to the rooftop of the UNIQ building in Bratislava’s city centre. The second investment round launched in June with a first closing in the summer of 2018 is being used for production and delivery of the first units to their customers and ramp-up to serial production. The investment round has been in a final closing steps at the time of writing this article. First round investors are already seeing a significant appreciation of their initial investment for taking risks at an early stage and were also participating in the second round. With 2.75 million Euros from dozens of investors in two investment rounds, Ecocapsule’s funding story demonstrates the benefits of professional equity crowd investing. Investors become a part of the company’s entrepreneurial story, can actively engage with the company and thus to help improve the value of their investment if they wish to do so.
The latest news says, that Ecocapsule has successfully agreed on deliveries and distribution partnership with a Dutch company in addition to already covering the Southeast Asian, US and Australian market.